[go1979]

I fully believe the capital outflow link to the rise in western real estate prices. As someone unlucky enough to be caught without any property, I am perplexed by the reasonable response. Friends have responded by taking insane loans (since property prices went up after said loans, these were really prudent financial decisions). I am at a loss. Will I be buying at the top? :(

[gutnor]

Careful here with the "prudent financial decisions" They took a risk and it paid off. It is only prudent if they were in a position to take the loss if the market had gone the other way. And I assume they still have their loan, so they are still at risk of losing the mean to pay it. Big risk, big reward/losses.

I talked to a guy that became property millionaire, if I had followed the exact same step he took, just with 2 years difference and a different city, I would have been in bankruptcy right now. You didn't/couldn't take a loan when they did - that boat has sailed. Buying today is a different market and you should approach it ignoring what you friends did in the past.

I won't give you market advise as I don't have a crystal ball. However, as a renter you are free to move around - that's your strength. Alternative to buying is therefore to move around and maximize your bang per rental buck. In most cities, there are areas where people would rather rent than buy and vice versa. Try to rent in the place where the rental yield is the minimum. Also, you have can look for better job opportunities that requires moving.

[lubos]

Foreign investors buying up real-estate don't do it for the love of it. They seek returns by renting out.

And even though real-estate value has increased a lot. Rental income from these properties didn't increase at the same rate. Tenants can't afford to pay rent landlords would like to charge so there is downwards pressure on returns these properties can generate.

Not to mention, interest rates are at record low. What's going to happen when they go up? Not only demand for real-estate will be lower, there are borrowers who have accumulated too much debt to buy real-estate. They might be simply forced to sell as they wouldn't be able to service their loans anymore.

Nobody can predict the future but I'm not going to be surprised if we witness another real-estate crash in 2-3 years.

[pjc50]

Lots of people suspect that the Chinese purchase of overseas property is mostly an expression of distrust at the Chinese government. Remember that China is still (very nominally) communist and not afraid to confiscate property of people who are sufficiently discredited. It happens occasionally in corruption crackdowns.

For this purpose, it's a minimum-risk store of wealth with a potential for appreciation and any actual returns are less of a priority. Something similar applies to Saudi and Russian oil wealth; an escape from the possibility of SHTF.

[mistermann]

> Foreign investors buying up real-estate don't do it for the love of it. They seek returns by renting out.

Except often they don't, rental income is almost like a rounding error to them (it's not really, but they can't be bothered - the main thing, it seems, is buying the asset.)

[chatmasta]

I'm expecting a significant rise in the number of homes for sale when interest rates spike. Many multi-property landlords are relying on "hard money loans" or "bridge loans" to finance their properties. The nature of these loans is that they put the asset itself (i.e. the house) up as collateral, but also allow the landlord to leverage the loan into another one. So a landlord can put just a little bit of money down on a house, and then leverage it into a chain of multiple houses.

When interest rates spike, landlords lose leverage ability and may even have to refinance their loans. Spiking interest rates will lead to an influx of homes into the market as landlords who did not plan well enough for the spike are caught underwater in the same way as residential homeowners were in 2008.

Private equity firms are backing the loans, so maybe they'll just take the houses when interest rates spike, and rent them to tenants themselves. In the future, we'll all be renting from the Blackstone group!

Disclaimer: I am very uninformed on this subject and do not know what I'm talking about. :)